Conference Paper: FDI and the Environment: Evidence from China

Academy of International Business 2009 Annual Meeting, San Diego, CA, 27-30 June 2009 How to Cite?

Abstract

The issue of how foreign direct investments (FDI) affect a host country’s environment has generated much
debate yet less convergence in the literature. Using panel data for 287 Chinese cities over the period of 2002-
2005, the paper aims to examine (1) if FDI produces a net impact on SO2 emission, and (2) how institutional
development of the host setting varies the strength of the relationship. The results show that FDI do harm the
environment by generating more pollution. However, institutional development cushions this negative impact.
Building on the institution-based theory, this study sheds new light on the long debated relationship between
FDI, institutions, and the environment of host countries. Policy implications are discussed. (For more
information, please contact: Danny Tan Wang, University of Hong Kong, Hong Kong, SAR-PRC:
dtwang@hkucc.hku.hk)

Academy of International Business 2009 Annual Meeting, San Diego, CA, 27-30 June 2009

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dc.identifier.uri

http://hdl.handle.net/10722/63311

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dc.description.abstract

The issue of how foreign direct investments (FDI) affect a host country’s environment has generated much
debate yet less convergence in the literature. Using panel data for 287 Chinese cities over the period of 2002-
2005, the paper aims to examine (1) if FDI produces a net impact on SO2 emission, and (2) how institutional
development of the host setting varies the strength of the relationship. The results show that FDI do harm the
environment by generating more pollution. However, institutional development cushions this negative impact.
Building on the institution-based theory, this study sheds new light on the long debated relationship between
FDI, institutions, and the environment of host countries. Policy implications are discussed. (For more
information, please contact: Danny Tan Wang, University of Hong Kong, Hong Kong, SAR-PRC:
dtwang@hkucc.hku.hk)